US futures rose and European stocks steadied as investors put aside concerns about the worsening global outlook, while UK bonds tumbled and the pound rose amid UK policy confusion.
The yield on 30-year gilts rose above 5% for the first time since late September after the Bank of England confirmed its plan to end emergency bond purchases on Friday and a report showed the UK economy shrank unexpectedly in August. Sterling rallied more than 1% after a report from Politico that the government may make further fiscal U-turns.
“The Bank of England is a test case for how hawkish central banks can be without doing damage to financial stability,” said Michael Metcalfe, global head of macro strategy at State Street Global Markets.
Meanwhile, Treasury yields and the dollar were little changed as traders await a key US inflation measure due Thursday that’s set to return to a four-decade high, underscoring broad and elevated price pressures that are pushing the Federal Reserve toward yet another large interest-rate hike next month. US investors are also looking to corporate earnings for clues about Fed policy.
“While futures positioning is now slightly less extreme, it is still a very bearish set up into what is seen as a binary market event tomorrow,” said Carl Dooley, head of EMEA trading at Cowen in London. That makes it “natural to see some bear covering, with the remaining bulls having another roll of the dice.”
Among notable premarket moves, Norwegian Cruise Line Holdings Ltd. gained after UBS raised its recommendation on the stock to buy amid strong improvement in bookings. Chip stocks were set to recoup some of this week’s losses stemming from fresh curbs on China’s access to US semiconductor technology.
In Europe, Credit Suisse Group AG slumped after a report that US authorities are investigating whether the bank helped clients hide assets.
Kristina Hooper, chief global market strategist for Invesco, said in a note that while world economy is slowing after rate hikes, there is yet to be a meaningful decline in inflation. “This is an extraordinary monetary policy tightening environment and we are waiting to see if something breaks globally,” she said. “The UK has come close.”
Elsewhere, gold and oil prices fluctuated.
NATO defense chiefs gathered in Brussels to discuss how to better protect critical infrastructure, ramp up weapons production and maintain support for Ukraine. In China, Shanghai is quietly shutting down schools and a raft of other venues as officials try to rein in a flareup that’s hit the financial hub.
Writes /FinanceYahoo/
Reports /TrainViral/
